Over the month of October, dwelling values among the capitals rose by 0.2%, according to CoreLogic RP Data’s Home Value Index report.

This was up by 1.4% over the quarter and 10.1% more than the previous year’s growth. The annual rate of growth across the combined capitals index has been on a cool down since July, when the index was still increasing by 11.1% per annum.

Tim Lawless, head of research for CoreLogic RP Data, said that there were a number of factors that contributed to this slowdown, and not just the rise in mortgage rates.

“We are also seeing approximately a 30% premium on investment related mortgage rates, tighter lending standards and borrowers generally requiring a larger deposit,” he said.

“Gross rental yields at record lows and affordability constraints are acting as a further disincentive, particularly in Sydney where the median unit price is equal to, or higher than the median house price in every other capital city. Additionally, new housing supply is moving through record levels which should help to ease the upwards trajectory of home values,” Lawless added.

According to Lawless, the Sydney market has recorded a cumulative capital gain of 77.0% since the end of 2008. Melbourne’s values have moved a cumulative 66.6% higher over the same time frame. Based on the median selling price in late 2008, Sydney homeowners accumulated around $316,000 in gains from the housing market, versus the approximately $246,000 by Melbourne homeowners.

“While the rate of growth is significant, it is important to remember that this growth is across two cycles; dwelling values were broadly tracking backwards during both the 2008 calendar year and between late 2010 through to mid-2012.”

Hobart is the only capital city where the values of homes dropped since the end of 2008, remarked Lawless. The Home Value Index indicated that the city is down 0.4% (about $1,155) since then end of the global financial crisis.

Lawless additionally pointed out that the slowdown in mining and resources infrastructure spending has affected the housing market, particularly in terms of demand, and its effects will linger for some time.

He outlined several other symptoms that the market is only going to cool down further.
  • Trending lower clearance rates, particularly in Sydney and Melbourne, where auction clearances were below 70% week to week
  • Monthly mortgage-related activity was lower compared with the same period last year, based on CoreLogic RP Data’s valuation platforms
  • Record levels of new housing supply entering the market, which could lead to reduced house price inflation over the coming year
  • Listing numbers have increased much more than a year ago in Sydney; higher levels of stock gives more options to buyers, making it less urgent for buyers to close their transactions, while vendors vie for more competitive prices and better deals among themselves